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1996 - 97
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
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|
VETERANS’ AFFAIRS
LEGISLATION
AMENDMENT (BUDGET AND SIMPLIFICATION MEASURES) BILL 1997 |
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EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Veterans’
Affairs,
The Honourable Bruce Scott MP)
81020 Cat. No. 96 7441 1 ISBN 0644 49946 X
TABLE OF CONTENTS
This Bill gives effect to a measure relating to the Veterans’
Entitlements Act 1986 announced as part of the Government’s 1996-97
Budget and to the simplification of rate calculation provisions in that
Act.
The measures contained in this Bill have no or negligible financial
impact.
SCHEDULE 1
AMENDMENT OF THE VETERANS’ ENTITLEMENTS ACT 1986
The
amendments of the Veterans’ Entitlements Act 1986 in Schedule 1
have two streams:
• removal of provisions relating to child related
payments, allowing instead payment of above minimum family payment under the
Social Security Act 1991. Similar changes were made to the Social
Security Act in 1993 when child related payments associated with pensions under
that Act were integrated into family payment.
• repeal of the six
existing rate calculators in the Veterans’ Entitlements Act 1986
and replacing them with a single rate calculator.
Date of
effect 1 January 1998
SCHEDULE 2
AMENDMENT OF THE AGED CARE ACT 1997
The amendments to the
Aged Care Act 1997 are consequent upon the repeal of the existing rate
calculators in the Veterans’ Entitlements Act 1986. They replace
references to the existing rate calculators with references to the new Rate
Calculator.
Date of effect 1 January 1998
SCHEDULE 3
AMENDMENT OF THE AGED CARE INCOME TESTING ACT 1997
The
amendments to the Aged Care Income Testing Act 1997 are consequent upon
the repeal of the existing rate calculators in the Veterans’
Entitlements Act 1986. They replace references to the existing rate
calculators with references to the new Rate Calculator.
Date of
effect 1 January 1998
Clause 1 sets out how the Act is to be cited.
Clause 2 sets out the various commencement dates of the provisions
in the Act. These will be explained in more detail as each topic is
explained.
Clause 3 provides that each Act specified in a Schedule is amended
as set out in the items of that Schedule.
Overview
The amendments of the Veterans’ Entitlements Act 1986
(VEA) in Schedule 1 have two streams:
• removal of
provisions relating to child related payments, allowing instead payment of above
minimum family payment under the Social Security Act 1991. Similar
changes were made to the Social Security Act in 1993 when child related payments
associated with pensions under that Act were integrated into family
payment.
• repeal of the six existing rate calculators in the VEA
and replacing them with a single rate calculator.
Background
The integration of child related payments into the family payment
arrangements of the Department of Social Security was announced in the 1996-97
Budget for Veterans’ Affairs. Service pensioners and income support
supplement recipients already deal with the Department of Social Security for
family payment and after 1 January 1998 will not have to provide similar details
to the Department of Veterans’ Affairs as well.
A Government
pre-election commitment to the veteran community was a “plain
English” version of the VEA. The consolidation of the rate calculators
represents a first instalment towards meeting that commitment.
The
existing rate calculators occupied some 110 pages in the last official
consolidation of the Act. The new Rate Calculator will occupy only about 34
pages. Taking account of other reductions in the bill, a reduction in the size
of the Act of more than 80 pages, or more than 10% of the existing Act, is being
achieved. The elimination of this duplication and complexity is a step towards
a more readily understood Act.
Explanation of the changes
The integration of VEA child related payments into family payment under
the Social Security Act announced in the Budget would have required significant
amendment of the rate calculators in the VEA.
There are a total of six
rate calculators in the VEA, and nine method statements detailing an overall
rate calculation process, as follows:
Section 41 - Service pensioner
without children
• only one overall rate calculation
process
Section 42 - Service pensioner with children
• only one
overall rate calculation process
Section 43 - Service pensioner who is
blind
• an overall rate calculation process for pensioners with
children; and
• another overall rate calculation process for pensioners
without children
Section 45 - Service pensioner on “frozen
rate”
• only one overall rate calculation process
Section
45X - Income support supplement recipient without children
• an overall
rate calculation process for recipients who are not blind;
and
• another overall rate calculation process for recipients who are
blind
Section 45Y - Income support supplement recipient with
children
• an overall rate calculation process for recipients who are
not blind; and
• another overall rate calculation process for
recipients who are blind
Simplistically it might have appeared that the
proposal to transfer child related payments to Social Security would merely
involve the removal of those rate calculators and overall rate calculation
process method statements for pensioners and recipients with
children.
However, certain elements associated with children that affect
the amount of the payment other than the direct child related payment needed to
be retained. For example a person’s income free area as calculated in the
income test module would still need to take account of children. The need to
retain these elements meant that the amendments would have impacted on all of
the ongoing rate calculators.
Considering the extent of duplication and
complexity which would have remained the opportunity has been taken to commence
a simplification of the VEA by removing all of the rate calculators in their
entirety and replacing them with a single rate calculator.
The new rate
calculator provides for six overall rate calculation processes as follows:
• service pensioner who is neither blind nor subject to the ceiling
rate;
• service pensioner who is blind;
• service pensioner
who is on the ceiling rate;
• service pensioner who is blind and on the
ceiling rate;
• income support supplement recipient who is not blind;
and
• income support supplement recipient who is blind.
The new
rate calculator will be in the newly created Schedule 6 of the VEA. The
new overall rate calculation process method statements maintain the processes
set out in the repealed rate calculators.
The new Rate Calculator has
seven Modules as follows:
• Overall rate calculation process;
• Maximum basic rate;
• Rent assistance;
• Pharmaceutical allowance;
• Ordinary/adjusted income test;
• Assets test; and
• Remote area allowance.
Other than the few points that are
drawn from the Social Security Act, the points for these modules are derived
from points in the existing rate calculators. The basis for each point is
provided in the explanation below.
A saving provision preserves the child
related payments of those who might be adversely affected by the transfer to
family payment under the Social Security Act 1991.
Explanation of the items
Item 1 inserts a reference to each of the new definitions into the
index of definitions in section 5. The new definitions are being inserted
by items 3, 4, 18 and 19.
Item 2 omits the references to
definitions being repealed from the index of definitions in section 5. The
definitions are being repealed by items 3, 5, 6, 7, 8, 12, 13, 14, 15, and
16.
Item 3 omits and inserts a definition for dependent
child in subsection 5F(1). The new definition ensures that if a child
is a dependent child under the Social Security Act the child will also be a
dependent child under the VEA. The old definition was almost exactly the same
as the definition in the Social Security Act, and making the definitions
identical will ensure parity, particularly for couples where one member receives
a social security pension and the other member a veterans’ affairs
pension.
Item 4 inserts a definition for FP child in
subsection 5F(1). The new definition is used instead of the expression
pension increase child, the definition for which is being repealed
by item 5.
Items 5 to 8 repeal definitions that are no
longer required after the transfer of child related payments to the Department
of Social Security.
Item 9 repeals a note to subsection 5F(1)
relating to one of the definitions being repealed from that
subsection.
Items 10 and 11 repeal subsections 5F(2), (3), (4) and
(6) and insert new subsections 5F(2) and (3) which clarify when a child
becomes a dependent child or an FP child under the new definitions being
inserted by items 3 and 4.
Items 12 to 16 repeal
definitions that are no longer required after the transfer of child related
payments to the Department of Social Security.
Item 17 amends the
definition of pension in subsection 5Q(1) by extending it to the
new Schedule 6. Thus in the new rate calculator pension will mean
a service pension or an income support supplement.
Item 18 inserts
a new definition for Rate Calculator, meaning the Rate Calculator
in Part 2 of Schedule 6, into subsection 5Q(1).
Item 19
inserts a new definition for war widow/war widower - pensioner
into subsection 5Q(1). That expression will mean a person receiving a pension
under Part II at the rate set down in subsection 30(1) or under Part IV by
reference to the rate set down in subsection 30(1).
Item 20
repeals subsections 5R(9) and (10), dealing with prescribed student child
determinations which will no longer be necessary after the transfer of child
related payments.
Items 21 to 25 amend subsections 5R(11) and (12)
by replacing references to “pensioner add-on child” with FP
child (new definition being inserted by item 4).
Items
26 and 27 repeal paragraph 35(1)(c) because Divisions in Part III no longer
include a Division 7 dealing with Rate Calculators.
Item 28 is a
technical amendment which removes paragraph 35(2)(d) because provisions relating
to bereavement payment are no longer in Part III, but are in
Part IIIB.
Items 29, 31 and 33 amend the notes to subsections
36A(2), 37A(2) and 38A(2) respectively by bringing a reference to rate
calculators into line with the defined term being inserted by item
18.
Items 30, 32 and 34 repeal sections 36N, 37N and 38N
dealing with how to work out the rate of the three types of service pension.
New sections 36N, 37N and 38N dealing with how to work out the rate of the three
types of service pension are substituted. The new sections state that the rate
is worked out in accordance with new section 41 being inserted by item
35.
Item 35 repeals Division 7 of Part III containing all of
the service pension rate calculators. New Division 7 dealing with the
calculation of the rate of service pension is substituted.
The new
Division includes new section 41 dealing with the rate of the three types of
service pension.
New Subsection 41(1) provides that the rate of the three
types of service pension is, except when new subsection 41(2) applies, to be
worked out in accordance with the new rate calculator in Schedule 6 being
inserted by item 141.
New subsection 41(2) provides that a half
instalment be paid on the first pension payday after a person has transferred to
service pension from a social security pension. The half instalment is
necessary because veterans’ affairs pensions are paid on the week between
social security pension paydays. The half instalment avoids the windfall that
would be gained by the pensioner if they were to receive two fortnightly
instalments only a week apart.
In the formula, pharmaceutical allowance
is separated so that it is paid in full, ensuring that the pensioner receives 26
payments of the allowance in a year.
New subsection 41(3) defines the
terms used in the half instalment formula in new
subsection 41(2).
New subsections 41(2) and 41(3) are a rewrite of
existing subsections like subsection 41(6).
Items 36 and 37
achieve the same outcome for income support supplement as item 35
does for service pension.
Item 36 removes the heading to a now
superfluous Subdivision.
Item 37 repeals and substitutes section
45S dealing with how to work out the rate of income support supplement.
New Subsection 45S(1) provides that the rate of income support
supplement is, except when new subsection 45S(2) applies, to be worked out in
accordance with the new rate calculator in Schedule 6 being inserted by item
141.
New subsection 45S(2) provides that there be an upper limit on
the amount of income support supplement to a person whose partner does not
receive an income support payment. The person cannot receive more than twice
the rate that the person would receive if their partner was receiving an income
support payment.
New subsection 45S(3) provides that a half instalment be
paid on the first pension payday after a person has transferred to income
support supplement from a social security pension. It and new subsection 45S(4)
are similar to new subsections 41(2) and (3) described for item 35
above.
Item 38 repeals sections 45T, 45U, 45V and 45W. The
equivalent of these sections is now in the Rate Calculator in Schedule 6 being
inserted by item 141.
Item 39 repeals subdivisions B and C
of Part IIIA containing both of the income support supplement rate calculators.
Calculation of the rate of income support supplement is now handled by the new
Rate Calculator in Schedule 6 being inserted by item 141.
Item
40 amends section 47 dealing with the application of the Division relating
to the conversion of foreign currency amounts. Subsection 47(3) which referred
to all of the rate calculators being repealed is substituted so that it refers
to the new Rate Calculator being inserted by item 141.
Item
41 repeals the heading of Division 10 of Part IIIB and substitutes a new
heading which refers only to maintenance income rather than to the maintenance
income test. The latter test applies only to child related payments, and the
maintenance income test in the family payment rate calculator in the Social
Security Act will now apply. The provisions in the Division will continue
because they need to be taken into account in determining ordinary and adjusted
income for the purposes of income testing.
Item 42 repeals and
substitutes paragraph 52Z(6)(b) so that it refers to the new sections dealing
with the calculation of service pension and income support supplement, sections
41 and 45S being inserted by items 35 and 37.
Items 43 to
46 amend section 52ZAAA dealing with the pension loan scheme definitions.
Four definitions, which referred to method statements and modules in the rate
calculators being repealed, are repealed and substituted with new definitions
that refer to the new Rate Calculator being inserted by item
141.
Items 47and 48 repeals notes to points 53F-2 and 53F-4 in
the treatment benefits income test calculator. The new notes substituted refer
to the new Rate Calculator being inserted by item 141.
Items 49
to 51 amend section 53M dealing with the determination of the amount of
pension for the purposes of making a bereavement payment. The amendments
maintain the existing meaning by replacing references to the old rate
calculators with references to the new rate Calculator being inserted by item
141.
Item 52 amends section 53R dealing with a bereavement
payment after the death of a child. Paragraph 53R(c) is repealed and paragraph
53R(b) now refers to a dependent child (new definition being inserted by item
3) in lieu of the old paragraph 53R(c) which specified the child by
reference to the payment of dependent child add-on.
Items 53 to 55
amend sections 55B, 55C and 55D dealing with payment of pensions to pensioners
in benevolent homes.
Item 53 repeals and substitutes subsection
55B(2) removing references to child add-ons which will no longer be paid after
the transfer of child related payments to Social Security.
Item 54
repeals section 55C because it related only to pensioners receiving the child
add-on which will no longer be paid after the transfer of child related payments
to Social Security.
Item 55 repeals and substitutes subsection
55D(1) removing the reference to child add-on.
Item 56 amends the
note to subsection 56G(2) so that it refers to the new heading of Division 10 of
Part IIIB being amended by item 41.
Item 57 repeals and
substitutes section 56GA dealing with the date of effect of a pension increase
determination because the pensioner has a dependent child. The new section
maintains the existing meaning by using the new definition of dependent child
being inserted by item 3.
Item 58 and 59 amend paragraphs
56H(7)(a) and 56H(8)(a) so that they refer to the appropriate point in the new
Rate Calculator being inserted by item 141.
Item 60 amends
the note to subsection 58K(1) so that it refers to the appropriate point in the
new Rate Calculator being inserted by item 141.
Items 61 to
72 amend section 59A dealing with indexed and adjusted amounts.
The
amendments in items 61, 63 to 66 and 68 to 72 are to the INDEXED AND
ADJUSTED AMOUNTS TABLE and omit references to the rate calculators that are
being repealed and substitute the equivalent references to the new Rate
Calculator being inserted by item 141.
Item 64 repeals
items 2, 3, 4 and 5 dealing with the indexation of child related payments from
the INDEXED AND ADJUSTED AMOUNTS TABLE.
Item 67 repeals items 7A
and 7B dealing with the free area and ceiling in the maintenance income test
from the INDEXED AND ADJUSTED AMOUNTS TABLE. This item is related to item
73 below. After the transfer of the child related payments there will no
longer be a need for a maintenance income test. Thus the new Rate Calculator
does not have a maintenance income test.
Item 73 repeals items 4A
and 4B from the CPI INDEXATION TABLE in section 59B. Those items related to the
maintenance income test which is no longer required in the VEA because it will
be applied in the family payment rate calculator in the Social Security
Act.
Item 74 repeals and substitutes section 59EA dealing with the
maintenance of certain indexed amounts in line with increases in Male Total
Average Weekly Earnings. References to particular points in the rate
calculators being repealed are changed so that they are references to the
corresponding points in the new Rate Calculator being inserted by item
141.
Item 75 repeals sections 59F and 59G dealing with the
adjustment of the rates of pension child add-ons and guardian
allowance.
Items 76 to 78 make technical amendments to section 59L
dealing with the adjustment of pharmaceutical allowance. Items 76 and 78
substitute the term “Social Security Act”, defined in subsection
5Q(1), for the proper short title of that Act. Item 77 omits and
substitutes a reference to Part VIIA in the abbreviation “PA(Part VIIA)
rate” defined in item 18 of the INDEXED AND ADJUSTED AMOUNTS TABLE in
section 59A.
Items 79 to 117 amend the compensation recovery
provisions in Part IIIC.
Because there will not be a dependent child
component of a person’s pension after the transfer to Social Security, it
is no longer necessary to refer to either the dependent child component or the
compensation affected component of the pension payments to the person. Most of
the amendments in this group remove such references. The other amendments are
individually described below.
Items 93 to 95 amend the definitions
in subsection 59Q(7) so that they refer to the corresponding points in the new
Rate Calculator being inserted by item 141.
Item 102 and
103 amend section 59T. Note 5 to subsection 59T(5) has references to
dependent child and compensation affected components removed and a reference to
a provision now included in Schedule 6 corrected. Example 3 to section 59T is
repealed because there is no longer a need for an example with a dependent child
component.
Item 107 amends section 59V by omitting and
substituting a reference to a module in the new Rate Calculator being inserted
by item 141.
Item 111 repeals example 3 to section 59W
because there is no longer a need for an example with a dependent child
component.
Item 118 amends the definition of annual payment
rate in subsection 67C(3) to clarify that a pension is not payable under
a rate calculator but is payable at the rate last determined by the Repatriation
Commission to be the rate payable to the person. Commission makes these
determinations under sections like section 36L dealing with the duties of
Commission in relation to a claim and under sections 56C and 56D dealing with
rate increase and rate reduction determinations.
Item 119 repeals
and substitutes subsection 67C(5). The new subsection replaces references to
the “frozen rate widows and widowers” with the term war widow/war
widower - pensioner defined in subsection 5Q(1) and being inserted by item
19. The new subsection also corrects references to elements in rate
calculators.
Items 120 to 125 repeal and substitute, or amend,
sections 67J, 67JA, 67JB and 67JC.
The new or amended sections maintain
existing policy by:
• replacing references to the “conditional payment rate”, an expression no longer used in overall rate calculation process method statements, with a reference to a rate of pension which does not include remote area allowance; and
• correct references to rate calculators so that they are references to
the corresponding elements of the new Rate Calculator being inserted by
item 141.
Items 126 and 128 amend sections 118A and
118B in Part VIIA dealing with pharmaceutical allowance and advance
pharmaceutical allowance. These amendments make pharmaceutical allowance for a
war widow/ war widower - pensioner, who is also in receipt of an income support
supplement, payable with the supplement instead of with the pension. This
change was necessary to allow the simplification deriving from a single rate
calculator covering both service pension and income support supplement. Now
income support supplement recipients receive their pharmaceutical allowance with
their supplement just like service pensioners receive their pharmaceutical
allowance with their pension. The total amount paid to a person in receipt of
both a war widow/er’s pension and income support supplement will remain
the same.
Item 126 amends section 118A dealing with eligibility
for pharmaceutical allowance by inserting a new eligibility paragraph for income
support supplement.
Item 128 amends section 118B dealing with the
circumstances in which a pharmaceutical allowance is not payable. By inserting
a reference to an income support supplement in subsection 118B(1A), that
supplement is rendered the same as a service pension, and a separate allowance
will not be paid because it is already being paid as an integral part of the
supplement or pension.
Item 127 is a technical amendment to
correct a reference to another provision in the Act.
Item 129
amends a note to section 118L correcting a reference to the location of
pharmaceutical allowance rates in the new Rate Calculator.
Items 130
to 137 amend section 118ZAD dealing with the adjustment of seniors health
card ordinary income limits. All of the amendments are to definitions and
correct references to items in tables in the new Rate Calculator.
Item
138 is a technical amendment that repeals section 198E dealing with
indexation of pharmaceutical allowance. Section 198E is obsolete because
section 59L adjusts the rate of pharmaceutical allowance.
Item 139
amends clause 1 of Schedule 5 dealing with savings and transitional provisions.
A reference to sections 41, 42, and 43 which are being repealed is replaced with
a reference to new section 41 being inserted by item 35.
Item
140 inserts two new clauses in Schedule 5 dealing with savings and
transitional provisions.
New clause 9 is a transitional provision
relating to the transfer of child related payments to Social Security. It
clarifies the position where backdating might be required after the repeal of
existing provisions.
Sub-clause 9(1) provides that if there are
any grants of service pension and income support supplement after 1 January 1998
that have a date of effect prior to that date (see section 36M for example) and
a child related payment would have been included in the rate of pension or
supplement, the determination by the Repatriation Commission is to include the
child related payment in all instalments payable in the period from the date of
grant to 1 January 1998.
Sub-clause 9(2) provides that if there
are any cases where a service pensioner or income support recipient tells the
Department after 1 January 1998 about a child born prior to that date, any
instalments in the period prior to 1 January are taken to include the child
related payment for the new born child.
New clause 10 is a savings
provision relating to the transfer of child related payments to Social Security.
It preserves the inclusion of child related payments in the service pension or
income support supplement of all of those pensioners or recipients who would be
disadvantaged by the transfer.
The child related payments involved are
dependent child add-on, the pensioner’s full rent assistance and guardian
allowance.
The payments will be saved until each child would have become
ineligible, or until the amount of above the minimum family payment potentially
payable exceeds the saved child related component of the pension or
supplement.
Full indexation of the rates of the child related components
will continue as if the legislation had not changed.
Sub-clause
10(1) sets out the application of the savings
provision.
Sub-clause 10(2) provides that the person’s
pension or supplement payable includes the child related amount until it ceases
to be greater than the above the minimum family payment
amount.
Sub-clause 10(3) provides that if the saved status is lost
it is not regained.
Sub-clause 10(4) sets out the meaning of
certain expressions used in the remainder of the clause.
Item 141
adds new Schedule 6 to the VEA. Schedule 6 deals with the calculation of rates
of service pension or income support supplement.
Schedule 6 has two
Parts, Part 1 dealing with preliminary matters and Part 2 setting out the Rate
Calculator.
Schedule 6
— Calculation of rates of
service
pension and income support
supplement
Part 1
— Preliminary
Clause 1 deals with the usual steps in the rate calculation
process. It is based on old section 40 being repealed by item 35. In
addition to setting out the usual steps, it indicates that the overall rate
calculation processes are described in the method statements in Module A of the
Rate Calculator.
Clause 2 deals with the standard categories of
family situations used in the Rate Calculator. A note indicates the location of
the definitions for those standard categories. The clause is based on old
sections 40A and 45T.
Clause 3 provides an explanation of the
structure of the Rate Calculator. It is based on old sections 40B and 45U. An
example demonstrates how a point number indicates where the point is located
within the structure of the Rate Calculator.
Clause 4 deals with
the application of the income and assets test reductions for income tax
purposes. It is based on old sections 40C and 45V.
Clause 5 deals
with commencing rates. All of the rates in the new Rate Calculator are exactly
the same as the corresponding rates that applied in the old rate calculators as
at 1 January 1997, as indexed and adjusted in accordance with the
indexation provisions.
Because the new Rate Calculator does not commence
until 1 January 1998, the rates set out in the Rate Calculator are unlikely to
be the rates then in force. However, sub-clause 5(2) provides that
the 1 January 1997 rates in the Rate Calculator are taken to be replaced by the
corresponding rates in force on commencement on 1 January 1998.
Part 2 — Rate Calculator
Module A — Overall rate calculation process
Module A sets out the overall rate calculation process method statements
for the six processes for calculating a service pension or income support
supplement, and details other provisions that apply generally to the calculation
of a pension or supplement.
Subpoint SCH6-A1(1) provides that the rate is
an annual rate. It is similar, for example, to old point 41-A1.
The
remainder of point SCH6-A1 deals with the six overall rate calculation process
method statements as follows:
• subpoint SCH6-A1(2) sets out method statement 1 for a service pensioner who is not blind and who is not limited by the ceiling rate;
• subpoint SCH6-A1(3) sets out method statement 2 for a service pensioner who is blind and who is not limited by the ceiling rate;
• subpoint SCH6-A1(4) sets out method statement 3 for a service pensioner who is not blind but who is limited by the ceiling rate;
• subpoint SCH6-A1(5) sets out method statement 4 for a service pensioner who is blind and who is limited by the ceiling rate;
• subpoint SCH6-A1(6) sets out method statement 5 for an income support supplement recipient who is not blind; and
• subpoint SCH6-A1(7) sets out method statement 6 for an income support
supplement recipient who is blind.
Method statements 1 to 6 very closely
follow existing overall calculation process method statements in the existing
rate calculators. The method statements have been simplified and made more
consistent with one another. The opportunity has been taken to correct some
technical errors.
As detailed above in relation to items 125 and
127, pharmaceutical allowance is now paid to income support supplement
recipients as a component of their supplement instead of as a separate
stand-alone allowance.
The treatment of advance payment deductions has
been improved by removing reference to these deductions from the method
statements. This corrected the technical error which required the amounts to be
deducted twice, once under the method statement and again under section 67D.
The Department has been unaware of this technical error and has been recovering
advance payments of pension only once.
The “plain English”
rewrite of Part III of the VEA in 1991 introduced rate calculators. The overall
rate calculation process method statement in the rate calculator for service
pensioners subject to the “frozen rate” ceiling in section 45
omitted the step allowing for the addition of a remote area allowance above the
ceiling rate. The Department has continued to pay the allowance above the
ceiling as provided for in the pre-rewrite legislation. The new method
statements correct this technical error.
Point SCH6-A2 provides that
members of a couple share income, assets and expenses equally. This provision
results in both members of a couple being paid an equal amount of pension or
supplement in the majority of cases. The point is similar to old
point 41-A2.
Point SCH6-A3 clarifies that pension or supplement for
a blind person is free of income or assets testing unless their pension is
calculated using step 1 in method statement 2. The point is similar to old point
43-A2.
Points SCH6-A4 to SCH6-A9 deal with the ceiling rate.
• points SCH6-A4 and SCH6-A5 are similar to old points 45X-A3 and 45X-A4 and set out the basic rules for calculating the ceiling applying to a war widow/war widower - pensioner (new definition inserted by item 19); and
• points SCH6-A6 to SCH6-A9 are similar to old points 45X-A5 to 45X-A7
and provide that a different ceiling applies to a war widow/war widower -
pensioner whose pension has been compensation reduced (by making these points
part of the calculation of the ceiling, method statements 5 and 6 are
simplified).
Module B — Maximum basic rate
Module B sets out the maximum basic rate that is referred to in method
statements 1, 2 and 5 in Module A.
Point SCH6-B1 is similar to old point
41-B1 and includes a table which sets out the maximum basic rate for the
different categories of family situations. Table B, like all of the other
Tables in the new Rate Calculator, has been simplified so that if there is more
than one category with the same rate, the categories are grouped together in a
single item. In this Table the grouping highlights the fact that there are only
two different rates;
• a higher rate covering persons who are not a member of a couple and those who are treated as if they are not members of a couple; and
• a lower rate for persons who are partnered.
Point SCH6-B2
specifies that the higher rate applies to income support supplement recipients
who are partnered but whose partner is getting neither pension nor benefit.
Service pensioners in this category will be paid the lower rate. This continues
the existing policy set out in the various maximum basic rate Tables in the old
rate calculators.
Module C — Rent assistance
Module C sets out the rent assistance that is to be added to a
person’s maximum basic rate according to method statements 1 and 5 in
Module A.
Point SCH6-C1 provides that points SCH6-C2 to SCH6-C11 apply to
both service pensioners and income support supplement recipients while points
SCH6-C12 to SCH6-C15 apply only to service pensioners.
This continues the
existing policy that the “disability pension income test” applies
only to service pensioners. Disability pension is not included as ordinary
income for income testing of service pensioners, but it is included in adjusted
income for income testing of income support supplement recipients.
Point
SCH6-C2 provides that rent assistance is an amount that is added to help cover
the cost of rent and is similar to old point 45X-D1.
Point SCH6-C3 deals
with eligibility for rent assistance. It is similar to old point 41-C2 except
that:
• because rent assistance for pensioners with children is paid as family payment, members of a couple with children cannot be eligible for rent assistance and paragraph SCH6-C3(f) is similar to paragraph 1064-D1 of the Social Security Act; and
• because the Aged Care Bill is expected to have commenced, paragraph
SCH6-C3(a) has been reworded to reflect the new policy that residential care
subsidy will be paid to providers instead of rent assistance to
residents.
Point SCH6-C4 provides that rent assistance is not added if
incentive allowance is being paid to the person’s partner. The point is
similar to old point 41-C3.
Point SCH6-C5 defines when a person has a
partner with a rent increased pension. This expression is used in the Tables in
points SCH6-C6 and SCH6-C8. The point is similar to old point
41-C5.
Point SCH6-C6 deals with the rent threshold rate and is similar to
old point 41-C2A. The rent threshold rate is a factor in determining one of the
two rates that might apply to a person in point SCH6-C8. Table C-1 details two
rent threshold rates that apply depending on the person’s family
situation.
Points like old point 41-C2B which provided for an increase in
the rent threshold rates from 1 January 1997 are no longer necessary
because those increases have been included in the rates shown in the
Table.
Point SCH6-C7 sets out the factors that affect the rate of rent
assistance. The point is similar to old point 41-C4.
Point SCH6-C8 deals
with the rate of rent assistance and is similar to old point 41-C6. The rate of
rent assistance to be added is the lesser of rate A from column 3 and rate B
from column 4 of Table C-2. The new point makes the formulas in column 3
smaller by using abbreviations for annual rent and rent
threshold rate. The latter definition makes it clear that those rates
come from Table C-1 in point SCH6-C6.
Points SCH6-C9 to SCH-C11 are
similar to old points 41-C7 to 41-C9 and deal with annual rent, rent paid by a
member of a couple and rent paid by a member of an illness separated or respite
care couple. Together these points provide the amount of annual rent to be used
in the formulas in Table C-2 in point SCH6-C8.
Point SCH6-C12 provides
that the remainder of Module C applies only to a service pensioner (also see
point SCH6-C1 and its explanation above).
Point SCH6-C13 deals with how
to work out the effect of disability pension on the rate of rent assistance.
The point, including the method statement, are similar to old point 41-C10.
A service pensioner’s rent assistance will be reduced if his disability
pension exceeds his rent assistance free area from point SCH6-C15.
Point
SCH6-C14 provides that for members of a couple, their disability pension is
shared. The point is similar to old point 42-D11.
Point SCH6-C15 is
similar to old point 41-C12 and details how a person’s rent assistance
free area is worked out. The free area is used to determine if the person has
disability pension in excess of the free area that would reduce the amount of
rent assistance being added.
The rent assistance examples are now based
on persons who have no dependent children.
Module D — Pharmaceutical allowance
Module D sets out the pharmaceutical allowance that is to be added to a
person’s maximum basic rate according to all of the method statements in
Module A.
As detailed above in relation to items 125 and 127,
pharmaceutical allowance is now paid to income support supplement recipients as
a component of their supplement instead of as a separate stand-alone
allowance.
Point SCH6-D1 provides that pharmaceutical allowance is to
added to a person’s maximum basic rate. The point is similar to old point
41-CA1.
Point SCH6-D2 is similar to old point 41-CA1A and details the
circumstances in which a person’s absence from Australia would render that
person ineligible to receive pharmaceutical allowance.
Point SCH6-D3 is
similar to old point 41-CA2 and prevents payment of pharmaceutical allowance to
a person receiving the allowance under the Social Security Act.
Points
SCH6-D4 and SCH6-D5 relate to payment of advance pharmaceutical allowance and
prevent the payment of further allowance before the end of the period covered by
the advance. The points are similar to old points 41-CA3 and
41-CA4.
Point SCH6-D6 prevents the payment of pharmaceutical allowance if
the annual limit has been reached. The point is a simplification of old points
like 41-CA5 and 41-CA6 which restated section 118M. The new point merely refers
to section 118M.
Point SCH6-D7 deals with the amount of pharmaceutical
allowance which should be added to the person’s maximum basic rate. The
point provides the same result as old points 41-CA7 and 41-CA8, but follows
point 1064-C8 of the Social Security Act which uses a Table to set out the
amounts to be added.
Module E — Ordinary/adjusted income test
Module E sets out the income test that is to be applied in working out a
person’s income reduced rate as required by method statements 1 and 5 in
Module A.
Point SCH6-E1 is the key to a single income test module for
both service pensioners and income support supplement recipients. It provides
that ordinary/adjusted income means ordinary income
in respect of a service pensioner and adjusted income in respect
of an income support supplement recipient. A note directs the reader to section
5H for the meaning of the defined terms.
Section 5H includes income test
definitions for income, ordinary income and
adjusted income. Briefly, certain aspects of the
relationship between these terms is as follows:
• income means income amounts earned, but does not include amounts excluded under subsection 5H(8);
• amounts of pension under Parts II or IV are excluded from income by paragraph 5H(8)(b);
• in paragraph 5H(8)(e) certain payments in respect of incapacity or death resulting from employment in connection with a war are also excluded from income, and this excludes instalments of pension payable by a foreign country that are similar to pensions under Parts II and IV;
• ordinary income means all income except maintenance income (defined in section 5K); and
• adjusted income is ordinary income plus
certain amounts that are excluded from income. These income
amounts re-included are certain pensions under Parts II and IV and payments
by a foreign country that are similar to those pensions under Parts II and
IV.
The income test for service pensioners is based on ordinary
income and the income test for income support supplement recipients is
based on adjusted income. This means that disability pensions and
war widow/er’s pensions are not income when working out the rate of
service pension, but are income when working out the rate of income support
supplement.
Point SCH6-E2 is similar to old point 42-E1 and includes a
method statement setting out how to work out the effect of the person’s
ordinary/adjusted income on the person’s maximum payment rate (maximum
basic rate plus rent assistance plus pharmaceutical allowance).
Point
SCH6-E3 deals with the ordinary/adjusted income of couples and is similar to old
point 42-E2. Couples share the total income of the couple equally.
Point
SCH6-E4 deals with a person who has received an arrears payment of periodic
compensation. The point is similar to old point 42-E2B and provides that the
income of the arrears payment is spread evenly across the compensation periodic
payments period.
Point SCH6-E5 provides that that the person’s
income free area is the income that the person can receive without any deduction
from the maximum payment rate. It is similar to old point 42-E3.
Point
SCH6-E6 is similar to old point 42-E4 and deals with the calculation of a
person’s ordinary/adjusted income free area. Table E-1 sets out free
areas for three items of standard categories of family situations. Additional
free area is provided to persons with dependent children. This additional free
area and the additional remote area allowance for dependent children (if they
are FP children, see new point SCH6-G2) are now the only ways in which children
may affect the rate of pension payable.
There is no longer a need for
points like old points 42-E5 and 42-E6 following the transfer of child related
payments to family payment.
Point SCH6-E7 prevents additional free area
being added for certain prescribed student children. It is similar to point
42-E7 but now refers to a prescribed student child within the meaning of the
Social Security Act. This change is consistent with the new definitions for
dependent child and FP child which refer to the Social Security Act (see items 3
and 4).
Points SCH6-E8 to SCH6-E10 deal with the reduction of the
additional free area for a dependent child as the result of the receipt of any
payment by the person or the couple in respect of the child. The points are
similar to old points 42-E8 to 42-E10 except for paragraph 42-E10(f) which
should already have been repealed.
The free area examples are similar to
the examples after old point 42-E10 and demonstrate how a free area is
calculated when there is a dependent child.
Point SCH6-E11 is similar to
old points 42-E11 to 42-E13 in a much simplified form. Concepts like DC excess
and remaining excess were associated with dependent child add-ons and are no
longer required.
These old provisions ensured that the higher pension
paid to one member of a couple because of the child add-on was eroded by the
income test first, tending to bring the pension paid to that member of the
couple back to equality with the other member, depending on the amount of income
received by the couple.
With these provisions removed, the reduction for
income above the free area can now be stated simply as half of that income above
the free area rather than setting out the same formula for the various family
situations in a Table.
Module F — Assets test
Module F sets out the assets test that is to be applied in working out a
person’s assets reduced rate as required by method statements 1 and 5 in
Module A.
Point SCH6-F1 is similar to old point 41-F1 and includes a
method statement setting out how to work out the effect of the person’s
assets on the person’s maximum payment rate (maximum basic rate plus rent
assistance plus pharmaceutical allowance).
Point SCH6-F2 deals with the
assets of couples and is similar to old point 41-F2. Couples share the total
assets of the couple equally.
Point SCH6-F3 is similar to old point 41-F3
and deals with the calculation of a person’s assets value limit. Table
F-1 sets out limits for not a member of a couple and
partnered.
Point SCH6-F4 deals with a person’s
reduction for assets and is similar to old points 41-F4 and 41-F5. Like
the reduction for income discussed above for point SCH6-E11, because the same
formula applies to all family situations, a Table is not required.
Module G — Remote area allowance
Module G sets out the remote area allowance that is to be added to obtain
a person’s rate of service pension or income support supplement in all of
the method statements in Module A.
Point SCH6-G1 sets out the eligibility
criteria for a remote area allowance. The point is similar to old point 42-H1
except that it now refers to including the allowance in the pension
rather than adding it to the pension. This acknowledges that the remote
area allowance becomes an integral part of the pension once it has been included
in the rate of pension.
Point SCH6-G2 is similar to old point 42-H2 and
deals with the rate of remote area allowance. Table G provides rates for two
items of family situations and provides additional allowance for any FP
child (new definition being inserted by item 3) of the
person.
Point SCH6-G3 requires any FP child to be physically present in
Australia before the additional allowance is payable. The point is similar to
old point 42-H5.
Points SCH6-G4 and SCH6-G5 deal with special rules where
the person’s partner has an FP child but is receiving neither pension
benefit or allowance nor additional remote area allowance for the child. These
provisions are additional to the old rate calculators. They are similar to
points 1064-H5 and 1064-H6 and are necessary in an environment where child
add-ons are not paid.
Commencement
Subclause 2(2) provides that Schedule 1 commences on 1 January
1998.
Overview
These amendments to the Aged Care Act 1997 are consequent upon the
repeal of the existing rate calculators in the Veterans’ Entitlements
Act 1986. They replace references to the existing rate calculators with
references to the new Rate Calculator.
Background
The Aged Care Bill 1997 is part of the residential aged care structural
reform package of legislation being introduced during the Autumn 1997
Sittings.
The Aged Care Bill 1997 provides for commencement on 1 July
1997.
Explanation of the changes
The Aged Care Act 1997 will refer to Modules and points in the
rate calculators at the end of sections 41 and 45X. These sections are being
repealed in Schedule 1.
The Aged Care Act 1997 is being amended so
that those references are to the corresponding Modules and points in the new
Rate Calculator being inserted in Schedule 1.
Explanation of the items
Item 1 omits a reference to a module in the rate calculator at the
end of section 41 and substitutes a reference to the corresponding module
in the Rate Calculator in Schedule 6.
Item 2 omits a
reference to a module in the rate calculator at the end of section 45X and
substitutes a reference to the corresponding module in the Rate Calculator in
Schedule 6.
Item 3 omits a reference to two points in the
rate calculator at the end of section 41 and substitutes a reference to the
corresponding points in the Rate Calculator in Schedule 6.
Item 4
omits a reference to two points in the rate calculator at the end of
section 45X and substitutes a reference to the corresponding points in the
Rate Calculator in Schedule 6.
Commencement
Subclause 2(2) provides that this Schedule will commence on 1
January 1998.
Overview
These amendments to the Aged Care Income Testing Act 1997 are
consequent upon the repeal of the existing rate calculators in the
Veterans’ Entitlements Act 1986. They replace references to the
existing rate calculators with references to the new Rate Calculator.
Background
The Aged Care Income Testing Bill 1997 is part of the residential aged
care structural reform package of legislation being introduced during the Autumn
1997 Sittings.
The Aged Care Income Testing Bill 1997 provides for
commencement on Royal Assent.
Explanation of the changes
The Aged Care Income Testing Act 1997 will refer to modules in the
rate calculators at the end of sections 41 and 45X. These sections are being
repealed in Schedule 1.
The Aged Care Income Testing Act 1997 is
being amended so that those references are to the corresponding modules in the
new Rate Calculator being inserted in Schedule 1.
Explanation of the items
Item 1 omits a reference to a module in the rate calculator at the
end of section 41 and substitutes a reference to the corresponding module
in the Rate Calculator in Schedule 6.
Item 2 omits a
reference to a module in the rate calculator at the end of section 45X and
substitutes a reference to the corresponding module in the Rate Calculator in
Schedule 6.
Commencement
Subclause 2(2) provides that this Schedule will commence on 1
January 1998.